Assume You Graph a Project's Net Present Value Given Various

question 21

Multiple Choice

Assume you graph a project's net present value given various sales quantities. Which one of the following is correct regarding the resulting function?

• A) The steepness of the function relates to the project's degree of operating leverage.
• B) The steeper the function, the less sensitive the project is to changes in the sales quantity.
• C) The resulting function will be a hyperbole.
• D) The resulting function will include only positive values.
• E) The slope of the function measures the sensitivity of the net present value to a change in sales quantity.

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Definitions:

Initial Yield

The initial yield is a financial measure indicating the first year's return on an investment in real estate or bonds, often expressed as a percentage of the investment's cost.

Yield Sensitivity

The degree to which the price of a bond or other debt security responds to changes in interest rates, affecting investors' returns.

Price Volatility

Price Volatility describes the extent to which the price of an asset or security fluctuates over time, indicating the level of risk involved.

Maturity

Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.